Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise.Retiring bonds payable before maturityCoastalView Magazine issued $600,000 of 15-year, 5% callable bonds payable on July 31, 2018, at 94. On July 31, 2021, CoastalView called the bonds at 101. Assume annual interest payments.RequirementsWithout making journal entries, compute the carrying amount of the bonds payable at July 31, 2021.Assume all amortization has been recorded properly. Journalize the retirement of the bonds on July 31, 2021. No explanation is required.

Question
Asked Jan 20, 2020
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Assume bonds payable are amortized using the straight-line amortization method unless stated otherwise.

Retiring bonds payable before maturity

CoastalView Magazine issued $600,000 of 15-year, 5% callable bonds payable on July 31, 2018, at 94. On July 31, 2021, CoastalView called the bonds at 101. Assume annual interest payments.

Requirements

  1. Without making journal entries, compute the carrying amount of the bonds payable at July 31, 2021.
  2. Assume all amortization has been recorded properly. Journalize the retirement of the bonds on July 31, 2021. No explanation is required.
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Expert Answer

Step 1

Discount on bonds payable: This is the value that arises when the bonds are sold at a price less than the face value. The discount is amortized by recording as contra-liability to Bonds Payable account with a normal debit balance on the balance sheet.

Step 2

Compute amortization of discount:

Accounting homework question answer, step 2, image 1
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Step 3

Compute balance of discount on bon...

Accounting homework question answer, step 3, image 1
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